v3.22.2.2
LEASES
 9 Months Ended
Sep. 30, 2022
Leases [Abstract]  
LEASES LEASESThe Company has both real estate leases and equipment leases. The main types of equipment leases include forklifts, trailers, printers and copiers, railcars, and trucks. Leases are categorized as both operating leases and finance leases. As a result of electing the practical expedient within ASU 2016-02, variable lease payments are combined and recognized on the balance sheet in the event that those charges and any related increases are explicitly stated in the lease. Such payments include common area
maintenance charges, property taxes, and insurance charges and are recorded in the right of use asset and corresponding liability when the payments are stated in the lease with (a) fixed or in-substance fixed amounts, or (b) a variable payment based on an index or rate. Due to the acquisitive nature of the Company and the potential for synergies upon integration of acquired entities, the Company determined that the reasonably certain criterion could not be met for any renewal periods beginning two years from September 30, 2022. In addition, the Company has historically not been exercising purchase options under the equipment leases as it does not make economic sense to buy the equipment. Instead, the Company has historically replaced the equipment with new leases. Therefore, the Company determined that the reasonably certain criterion could not be met as it relates to purchase options. The Company has no residual value guarantees in lease transactions.
On June 22, 2022, the Company signed a ten-year real estate sublease for approximately 40,000 square feet of office space, which will serve as the Company's corporate headquarters and a laboratory facility. The sublease will not commence until the sublandlord substantially completes its work per the sublease agreement, which will occur in the fourth quarter of 2022. The Company will recognize a right of use asset and a lease liability at the commencement date based on ASC 842, Lease Accounting. As of September 30, 2022 the Company did not record a right of use asset or lease liability on the balance sheet in connection with this lease.
The Company has not identified any embedded leases. As indicated above, the Company elected the practical expedient to combine lease and non-lease components and recognizes the combined amount on the condensed consolidated balance sheet. Management determined that since the Company has a centralized treasury function, the parent company would either fund or guarantee a subsidiary's loan for borrowing over a similar term. As such, the Company's management determined it is appropriate to utilize a corporate based borrowing rate for all locations. The Company developed four tranches of leases based on lease terms and these tranches reflect the composition of the current lease portfolio. The Company's borrowing history shows that interest rates of a term loan or a line of credit depend on the duration of the loan rather than the nature of the assets purchased by those funds. Based on this understanding, the Company elected to use a portfolio approach to discount rates, applying corporate rates to the tranches of leases based on lease terms. Based on the Company's risk rating, the company applied the following discount rates for new leases entered into during 2022: (1) 1-2 years, 1.45% (2) 3-4 years, 2.04% (3) 5-9 years, 2.38% and (4) 10+ years, 3.10%.
In connection with its December 2019 acquisition of Zumbro River Brand, Inc., the Company assumed the finance lease commitment for a warehouse, with an expiration date of March 31, 2033. The warehouse can be purchased at a pre-determined price beginning in 2023. At September 30, 2022 and December 31, 2021, the Company had finance lease liabilities of $2,345 and $2,470, respectively, which were recorded under "Lease liabilities" (current and non-current) on the condensed consolidated balance sheets.
Right of use assets and lease liabilities at September 30, 2022 and December 31, 2021 are summarized as follows:
Right of use assetsSeptember 30, 2022December 31, 2021
Operating leases$11,617 $6,929 
Finance leases2,202 2,359 
Total$13,819 $9,288 
Lease liabilities - currentSeptember 30, 2022December 31, 2021
Operating leases$3,727 $2,194 
Finance leases173 167 
Total$3,900 $2,361 
Lease liabilities - non-currentSeptember 30, 2022December 31, 2021
Operating leases$8,069 $4,811 
Finance leases2,172 2,303 
Total$10,241 $7,114 
For the three and nine months ended September 30, 2022 and 2021, the Company's total lease costs were as follows, which included amounts recognized in earnings, amounts capitalized on the balance sheets, and the cash flows arising from lease transactions:
Three Months Ended
September 30,		Nine Months Ended
September 30,
2022202120222021
Lease Cost
Operating lease cost$1,190 $788 $2,782 $2,274 
Finance lease cost
Amortization of ROU asset53 52 157 157 
Interest on lease liabilities30 32 91 98 
Total finance lease83 84 248 255 
Total lease cost$1,273 $872 $3,030 $2,529 
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases$1,164 $761 $2,772 $2,249 
Operating cash flows from finance leases30 32 91 98 
Financing cash flows from finance leases42 40 125 118 
$1,236 $833 $2,988 $2,465 
Right-of-use assets obtained in exchange for new operating lease liabilities, net of right-of-use assets disposed$2,275 $502 $7,552 $2,914 
Weighted-average remaining lease term - operating leases3.83 years4.32 years3.83 years4.32 years
Weighted-average remaining lease term - finance leases10.65 years11.67 years10.65 years11.67 years
Weighted-average discount rate - operating leases2.9 %3.7 %2.9 %3.7 %
Weighted-average discount rate - finance leases5.1 %5.1 %5.1 %5.1 %
Rent expense charged to operations under operating lease agreements for the three and nine months ended September 30, 2022 aggregated to approximately $1,190 and $2,782, respectively, and $788 and $2,274 for the three and nine months ended September 30, 2021, respectively.
LEASES LEASESThe Company has both real estate leases and equipment leases. The main types of equipment leases include forklifts, trailers, printers and copiers, railcars, and trucks. Leases are categorized as both operating leases and finance leases. As a result of electing the practical expedient within ASU 2016-02, variable lease payments are combined and recognized on the balance sheet in the event that those charges and any related increases are explicitly stated in the lease. Such payments include common area
maintenance charges, property taxes, and insurance charges and are recorded in the right of use asset and corresponding liability when the payments are stated in the lease with (a) fixed or in-substance fixed amounts, or (b) a variable payment based on an index or rate. Due to the acquisitive nature of the Company and the potential for synergies upon integration of acquired entities, the Company determined that the reasonably certain criterion could not be met for any renewal periods beginning two years from September 30, 2022. In addition, the Company has historically not been exercising purchase options under the equipment leases as it does not make economic sense to buy the equipment. Instead, the Company has historically replaced the equipment with new leases. Therefore, the Company determined that the reasonably certain criterion could not be met as it relates to purchase options. The Company has no residual value guarantees in lease transactions.
On June 22, 2022, the Company signed a ten-year real estate sublease for approximately 40,000 square feet of office space, which will serve as the Company's corporate headquarters and a laboratory facility. The sublease will not commence until the sublandlord substantially completes its work per the sublease agreement, which will occur in the fourth quarter of 2022. The Company will recognize a right of use asset and a lease liability at the commencement date based on ASC 842, Lease Accounting. As of September 30, 2022 the Company did not record a right of use asset or lease liability on the balance sheet in connection with this lease.
The Company has not identified any embedded leases. As indicated above, the Company elected the practical expedient to combine lease and non-lease components and recognizes the combined amount on the condensed consolidated balance sheet. Management determined that since the Company has a centralized treasury function, the parent company would either fund or guarantee a subsidiary's loan for borrowing over a similar term. As such, the Company's management determined it is appropriate to utilize a corporate based borrowing rate for all locations. The Company developed four tranches of leases based on lease terms and these tranches reflect the composition of the current lease portfolio. The Company's borrowing history shows that interest rates of a term loan or a line of credit depend on the duration of the loan rather than the nature of the assets purchased by those funds. Based on this understanding, the Company elected to use a portfolio approach to discount rates, applying corporate rates to the tranches of leases based on lease terms. Based on the Company's risk rating, the company applied the following discount rates for new leases entered into during 2022: (1) 1-2 years, 1.45% (2) 3-4 years, 2.04% (3) 5-9 years, 2.38% and (4) 10+ years, 3.10%.
In connection with its December 2019 acquisition of Zumbro River Brand, Inc., the Company assumed the finance lease commitment for a warehouse, with an expiration date of March 31, 2033. The warehouse can be purchased at a pre-determined price beginning in 2023. At September 30, 2022 and December 31, 2021, the Company had finance lease liabilities of $2,345 and $2,470, respectively, which were recorded under "Lease liabilities" (current and non-current) on the condensed consolidated balance sheets.
Right of use assets and lease liabilities at September 30, 2022 and December 31, 2021 are summarized as follows:
Right of use assetsSeptember 30, 2022December 31, 2021
Operating leases$11,617 $6,929 
Finance leases2,202 2,359 
Total$13,819 $9,288 
Lease liabilities - currentSeptember 30, 2022December 31, 2021
Operating leases$3,727 $2,194 
Finance leases173 167 
Total$3,900 $2,361 
Lease liabilities - non-currentSeptember 30, 2022December 31, 2021
Operating leases$8,069 $4,811 
Finance leases2,172 2,303 
Total$10,241 $7,114 
For the three and nine months ended September 30, 2022 and 2021, the Company's total lease costs were as follows, which included amounts recognized in earnings, amounts capitalized on the balance sheets, and the cash flows arising from lease transactions:
Three Months Ended
September 30,		Nine Months Ended
September 30,
2022202120222021
Lease Cost
Operating lease cost$1,190 $788 $2,782 $2,274 
Finance lease cost
Amortization of ROU asset53 52 157 157 
Interest on lease liabilities30 32 91 98 
Total finance lease83 84 248 255 
Total lease cost$1,273 $872 $3,030 $2,529 
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases$1,164 $761 $2,772 $2,249 
Operating cash flows from finance leases30 32 91 98 
Financing cash flows from finance leases42 40 125 118 
$1,236 $833 $2,988 $2,465 
Right-of-use assets obtained in exchange for new operating lease liabilities, net of right-of-use assets disposed$2,275 $502 $7,552 $2,914 
Weighted-average remaining lease term - operating leases3.83 years4.32 years3.83 years4.32 years
Weighted-average remaining lease term - finance leases10.65 years11.67 years10.65 years11.67 years
Weighted-average discount rate - operating leases2.9 %3.7 %2.9 %3.7 %
Weighted-average discount rate - finance leases5.1 %5.1 %5.1 %5.1 %
Rent expense charged to operations under operating lease agreements for the three and nine months ended September 30, 2022 aggregated to approximately $1,190 and $2,782, respectively, and $788 and $2,274 for the three and nine months ended September 30, 2021, respectively.